Effects of Globalization on Labor’s Share in National Income
IMF Working Papers, December 1, 2006
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Bibliographic details
- Authors: Anastasia Guscina
- Published: December 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451865547.001
Overview and scope
- Author: Anastasia Guscina
- Publication date: December 1, 2006
- Publication type: IMF Working Papers, Working Paper No. 2006/294, Issue: 294, Volume: 2006
- Pages: 33
- DOI: https://doi.org/10.5089/9781451865547.001
- Stock No: WPIEA2006294
- ISBN: 9781451865547
- ISSN: 1018-5941
- Sample and period: panel of 18 industrial countries over 1960-2000
- Sample split: 1985 into preglobalization/pre-IT revolution and postglobalization/post-IT revolution eras
- Subjects: Employment, Employment protection, Labor, Labor share, National income
- Keywords: globalization, productivity, share, WP
Research question and methodology
- Objective:
- Analyze the role of three factors in explaining movements in labor's share of national income: factor-biased technological progress, openness to trade, and changes in employment protection.
- Data and empirical design:
- Panel of 18 industrial countries covering 1960-2000.
- Sample split at 1985 to distinguish preglobalization/pre-IT revolution and postglobalization/post-IT revolution eras.
Key findings
- Decline in labor's share:
- The past two decades (relative to the paper) saw a decline in labor's share of national income in several industrial countries.
- Drivers:
- Results suggest the decline in labor's share during the past few decades in the OECD member countries may have been largely an equilibrium, rather than a cyclical, phenomenon.
- The adjustment reflected the distribution of national income between labor and capital responding to capital-augmenting technological progress and a more globalized world economy.
- Role of examined factors:
- Factor-biased technological progress (capital-augmenting) and increased openness to trade are emphasized as central contributors.
- Changes in employment protection are analyzed as an additional explanatory factor.
Implications (analytical)
- Interpretation:
- The shift in labor's share is interpreted as a structural adjustment to technological and globalization-driven changes, not primarily cyclical fluctuations.
- Policy-relevant considerations:
- Policymakers assessing labor-income dynamics should account for long-run equilibrium effects from capital-augmenting technological change and globalization when designing labor-market and social policies.
Source: IMF Working Paper "Effects of Globalization on Labor’s Share in National Income" by Anastasia Guscina (December 1, 2006).